Bloomberg News

California Teacher Pension Fully Funded in 52 Years, Report Says

February 02, 2012

Feb. 1 (Bloomberg) -- The California State Teachers’ Retirement System, with higher contributions from teachers, school districts and the state, may have all the money needed to pay its obligations, 52 years from now, according to a new report.

Calstrs, whose $144.8 billion in assets make it the second- largest U.S. public pension, had only 71 percent of what it needs to cover forecast benefits as of June 30, 2010, down from 78 percent a year earlier, according to a statement. The shortfall amounts to $56 billion.

The fund would be at 100 percent by 2064 if new teachers were required to put 12.2 percent of their salaries toward retirement, from 8 percent now, phased in beginning in 2016, according to one projection in a report to the board. Current teachers would contribute 10 percent; school districts, 14.5 percent of payroll, from 8.25 percent; and the state, 3.1 percent of its budget for teacher payroll, now about 2 percent.

“This is really the governor and the Legislature’s decision,” Ed Derman, the fund’s deputy chief executive officer, said on a conference call with reporters yesterday. “We’re here to help you do this, but you’ve got to solve the problem.”

Full funding by 2064 would also require Calstrs’ investments to earn an average annual return of 7.75 percent. Actuaries have recommended lowering the rate to 7.5 percent.

Six Projections

The report to the Calstrs board, scheduled for discussion tomorrow, outlines six scenarios that would spread the added costs among school districts, educators and the state. Each would require instructors to pay more. Only one would impose additional cost on new teachers. All six would squeeze more from school districts to varying degrees. Four would require additional state money.

Governor Jerry Brown didn’t include additional funds for Calstrs in a series of measures he outlined in October to narrow pension funding gaps.

Derman said Brown’s proposals, which include raising the retirement age and creating a 401(k)-style hybrid retirement plan for new employees, would only partially deal with the funding gap, which was estimated at $56 billion in June 2010.

“You still have the unfunded liability for all of the existing members,” he said. “The governor’s proposal doesn’t change that.”

--Editors: Pete Young, Ted Bunker

To contact the reporter on this story: James Nash in Sacramento at

To contact the editor responsible for this story: Mark Tannenbaum at

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